Wall Street; New Name, New Life, for Astrum

By Stephanie Strom

Published: September 26, 1993

IT'S rare to find a potential blue chip that does not even boast a listing on a major stock exchange. But the Astrum International Corporation, the maker of Samsonite luggage, Culligan water filters and Botany 500 suits, may be one orphan that deserves a second look.

The company, fresh out of bankruptcy, changed its name from the far better-known E-II Holdings to distance itself from a checkered past. The company, gobbled up by American Brands in 1987, gained notoriety when Meshulam Riklis, the flashy financier, assumed control a year later. Before long, he was stripping the company's assets and sticking it with liabilities.

Mr. Riklis is no longer associated with the company. Now, not only is the smart money betting on the company he left behind, it's also sitting on the board. Apollo Advisers L.P., headed by the former mergers chief at Drexel Burnham Lambert, Leon Black, has three seats. Carl C. Icahn, erstwhile owner of Trans World Airlines, controls two.

Only slightly less involved are Fidelity Investments, the Loews Corporation and George Soros, the investor, all big shareholders.

By several accounts, it is Steven J. Green, the company's chief executive, who has kept those big-name investors on board. Mr. Green, a real estate magnate who was brought in by Mr. Riklis in 1990 to sell some E-II assets, has set about revitalizing the company's brand names at a time when brand names are causing Wall Street to hold its nose.

Skeptics who initially mistrusted his ties to Mr. Riklis now applaud. "He has a good track record," said Darryl Schall, who follows distressed securities for Dabney Resnick Inc. "And you have to figure Apollo, Loews, Fidelity and Soros aren't dummies. If you follow on their coattails, you wouldn't do badly."

That is an understatement. The company has prospered in spite of bankruptcy and the recession. Sales increased more than 10 percent to $957.5 billion in the fiscal year that ended Jan. 30, the last period reported. Operating profits jumped almost 11 percent.

The 15.5 million shares, which are traded only on a when-issued basis, are quoted at $20 apiece, up from the $14.55 price assigned to them in the reorganization. (The company expects its shares will trade over-the-counter within weeks, at which time investors who bought shares on a when-issued basis will be able to substitute them for the real thing.)

Wall Street credits Mr. Green, who owns 3 percent of the stock, for shielding the operating companies from the three-ring circus of their parent's bankruptcy proceedings and for ridding Astrum of Mr. Riklis's expensive toys and trappings. But Mr. Green is not interested in discussing corporate history. Instead, he is firmly focused on the future of what he calls Astrum's "bag of tricks," his three operating companies. His goal is to build at least two of them into independently viable businesses that can be spun off in public offerings.

Samsonite, he hints, might be ready to leave the nest within a year, if the market cooperates. In August the luggage maker paid $70 million for American Tourister, a maker of lower-priced luggage that gives it entree into discount stores like Wal-Mart. The acquisition should allow Samsonite to expand without diluting the upscale Samsonite name.

Mr. Green also plans to use Samsonite's global distribution network to pump up American Tourister's sales abroad. About 60 percent of Samsonite's sales are made outside the United States, compared with some 2 percent for American Tourister. Developing international markets has been one of Mr. Green's fortes, and his weekly agenda often includes stops in places like Hanoi or Bratislava. He sees big opportunities to expand Culligan outside the United States as well, particularly in less-developed countries that have weak water-supply infrastructure. "They're asking themselves why the water they flush through the toilet should be as pure as the water they send through the tap for washing and drinking," he said. "We think they're going to find cost-effective, efficient ways of differentiating water for various uses."

Mr. Green is also expanding Culligan's reach at home. Visitors to his office are served Culligan water from small bottles in lieu of Perrier, and the company is testing a water vending machine in 7-Eleven stores. "You'll spend more for a gallon of designer water than you will for a gallon of fuel for your car," Mr. Green said. "We like that kind of a market."

His enthusiasm for water borders on wackiness. He envisions environmentally safe laundromats using pure water, and drinking water laced with vitamins. Yet there is method to his madness: if investors think of Culligan as an environmental play, they will assign a higher multiple to the unit's stock, if and when it goes public.

McGregor, Astrum's apparel business, is probably his biggest challenge. Men's suits have been losing market share as men dress more casually, and although Botany 500 suits have been a hit in Moscow, the company has trouble squeezing profits from the business elsewhere. Analysts expect the company to shed manufacturing, but keep the licensing.

Asked whether Astrum's future isn't somehow hobbled by Wall Street's current distaste for brand names, Mr. Green said not at all. "It's all in how you manage them and how you build them," he said. "You can't just put them out there and expect them to perform miracles."

To illustrate, Mr. Green, a Jew who is a big supporter of Catholic causes and has a picture of himself and Mother Teresa on the credenza in his office, recounted a story about a rabbi and priest. The two clerics attend a boxing match, and when one fighter crosses himself before marching into the ring, the rabbi asks the priest whether the hasty motion gave the boxer an edge. "No," the priest replied, "not if he can't fight."